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How to Create a Stablecoin

How to Create a Stablecoin

Introduction

The stablecoin market has grown fast, surpassing the transaction volumes of Visa and Mastercard combined. Stablecoins have moved from crypto experiment to core financial infrastructure.

New rules like the U.S. GENIUS Act, the EU’s MiCA, and Hong Kong’s Stablecoin Ordinance mean compliance now matters as much as technology. This article walks you through how to build a stablecoin from concept to launch.

What Makes Stablecoins Different

Unlike Bitcoin or Ethereum, stablecoins aim to maintain a fixed value, usually pegged to the U.S. dollar or a commodity like gold. They deliver the benefits of blockchain, speed, transparency, and low fees, without the volatility of crypto assets.

Each legitimate stablecoin should be fully supported by reserves equal to its circulating value.

The Four Main Models

  • Fiat-backed (e.g., USDC, USDT): Every token is backed 1:1 with fiat currency or short-term Treasuries. Simple, transparent, and widely trusted.

  • Crypto-backed (e.g., DAI): Uses volatile crypto as collateral, requiring over-collateralization (often $1.50 in crypto per $1 issued).

  • Commodity-backed: Pegged to assets like gold, stored and audited in secure vaults.

  • Algorithmic: Use supply controls instead of collateral. After the Terra/LUNA collapse, these face steep regulatory and trust hurdles.

The 2025 Regulatory Landscape

The GENIUS Act established the first U.S. federal framework for stablecoins. Anyone issuing into U.S. markets must meet strict reserve, disclosure, and licensing standards.

Key GENIUS Act Rules

  • 1:1 Reserves: Every token must be backed by cash or approved liquid assets (Treasuries, insured deposits, repo agreements, etc.).

  • Monthly Disclosures: Issuers must publish reserve breakdowns and avoid misleading claims about government backing.

  • Licensing: Banks can issue through subsidiaries. Nonbanks need approval from the OCC or state regulators. Once circulation exceeds $10 billion, federal oversight is required.

Global Compliance Snapshot

  • EU (MiCA): Requires authorization to issue or market asset-referenced tokens.

  • Hong Kong: Licenses are mandatory for HKD-backed issuers.

  • Cross-Border Expansion: The U.S. Treasury is exploring regulatory “passporting” with aligned jurisdictions to ease global rollout.

Planning Your Stablecoin

Defining Your Use Case

What problem are you solving?

  • Remittances: Stablecoins now power 3% of global cross-border payments thanks to speed and cost.

  • DeFi: They’re the liquidity layer for lending, trading, and yield farming.

  • Treasury Management: Corporates use them for blockchain efficiency without volatility.

Your target market drives your design, compliance approach, and blockchain choice.

Choosing Your Backing Model

  • Fiat-backed: Easiest to regulate and audit. Requires banking partners, custodians, and monthly attestations.

  • Asset-backed: Useful if you can access commodities like gold or real estate; comes with added storage and regulatory complexity.

  • Algorithmic: Heavily scrutinized—best avoided unless you have a novel, resilient design.

Budget Reality Check

Expect north of $100k in compliance costs alone.

Development costs can get expensive too, and security audits can run $50K–$200K each.

Factor in banking, legal, and attestation costs. If that’s too steep, consider partnering with an existing issuer or building on their infrastructure.

Technical Architecture

Choosing a Blockchain

Ethereum remains the default given its mature tooling, security, and ecosystem support. But multi-chain deployment is now standard.

  • Solana: High throughput, low fees.

  • Polygon & Base: Ethereum-compatible with better performance.

Pick the network that makes the most sense for your use case. Payments will need a faster blockchain for example.

Smart Contract Design

Your contract needs three essentials: mint, burn, transfer.

Add:

  • Upgradeability (UUPS/Transparent Proxy)

  • Pause/emergency functions

  • Access control and gas optimization

You must do rigorous tests (unit tests, stress tests, and security tests) before mainnet launch.

Reserve Management

Reserves are a core piece to any stablecoin. Be sure to:

  • Build early banking and custody relationships.

  • Publish real-time dashboards showing reserve composition and total supply.

  • Automate redemption for smooth fiat conversions.

Integrations

For adoption, integrate everywhere:

  • Wallets & SDKs: Make it easy for developers to plug in.

  • Exchanges: Provide liquidity and documentation.

  • Payment Processors: Enable real-world use through instant fiat conversion.

Security and Risk Management

Smart Contract Security

Audits, internal testing, and bug bounties are a must. Hire multiple reputable audit firms to help with this. Launch a bug bounty program before going live. Offer real rewards ($10,000–$100,000+) to attract ethical hackers who’ll find issues your team might miss.

Operational Security Measures

Use multi-signature wallets for all admin actions such as minting, upgrades, and parameter changes. This prevents single-point failures and insider abuse.

Keep reserves in cold storage as much as possible, with minimal funds in hot wallets for daily operations. Use air-gapped systems for large transactions.

Create detailed disaster recovery plans covering contract bugs, system outages, or banking failures. Know what happens if your primary custodian goes down or a critical bug hits production.

Financial Risk Controls

The GENIUS Act limits reserves to low-risk assets. Diversify reserves across banks and asset classes to reduce counterparty risk.

Maintain liquidity buffers for mass redemptions. If 10% of holders cash out in a day, you should handle it easily. Manage interest rate exposure on Treasuries by matching durations with expected redemption timelines.

Regulatory Compliance Implementation

Licensing and Registration

Regulators have 120 days to act on applications, but incomplete filings reset the clock. Companies must submit everything: business plans, financials, executive backgrounds, compliance procedures, reserve policies, and technical documentation.

State licensing is faster and cheaper but requires one per state. Federal licensing offers nationwide coverage with higher capital and oversight requirements. Choose based on your scale and risk tolerance.

AML & KYC

Stablecoin issuers fall under the Bank Secrecy Act, requiring AML and sanctions programs, including Know Your Customer (KYC) checks. Users must verify identity before minting or redeeming tokens.

Implement transaction monitoring to flag suspicious behavior such as large movements, rapid transfers, or links to sanctioned wallets. Build technical capacity to freeze, seize, or burn tokens under lawful orders.

Ongoing Obligations

The GENIUS Act mandates monthly reserve reports and public disclosures. Use accounting firms that understand both traditional finance and blockchain attestations.

Issuers with over $50 billion outstanding must also submit annual audited financial statements. Regular regulatory examinations are routine so document everything and stay audit-ready.

Launch and Market Integration

Testing

Deploy first to testnets (Goerli, Sepolia, or Solana devnet). Invite developers to test integrations and identify UX friction. Run small beta programs with a few hundred users to test minting, transfers, and redemptions under real conditions.

Stress test redemptions to see if your backend handle dozens of simultaneous redemptions without breaking.

Mainnet Launch

Roll out in phases. Start small (e.g., $1 million issued), verify stability, then continue to scale. This demonstrates caution to regulators and builds user trust.

Provide initial liquidity on major DEXs and incentivize early LPs. Then pursue centralized listings, starting with mid-tier exchanges before approaching top ones.

Ecosystem Partnerships

Utility drives adoption. Integrate with DeFi protocols, lending markets, and yield aggregators to make your stablecoin useful from day one. Partner with liquidity providers and payment companies so merchants can accept it easily.

Post-Launch Operations and Scaling

Liquidity Management

Maintain deep liquidity through in-house or external market makers. Users should trade large amounts without price slippage.

Monitor automated DEX pools, rebalance incentives, and ensure coverage across major trading pairs.

Governance and Community

If decentralized, design transparent governance such as token holders voting on upgrades, parameters, and reserve strategy.

Engage your community. Open communication through Discord, Telegram, and AMAs builds trust and helps surface issues before they escalate.

Common Pitfalls

Avoid the mistakes that sank others:

  • Ignoring regulation: Engage legal experts early.

  • Weak reserves: Always over-collateralize and maintain smooth redemptions.

  • Security shortcuts: One exploit can destroy billions and eliminate trust entirely.

  • Poor liquidity: Plan market-making and incentives before launch.

  • Slow redemption: Clunky off-ramps kill confidence. Make redemptions fast and simple.

  • Compliance shortcuts: Skipping AML/KYC or audits will eventually catch up to you.

Conclusion

Building a stablecoin requires technical expertise and commitment to compliance and regulation:

  1. Differentiate: The market already has USDC, USDT, and many others. Define what makes yours unique.

  2. Build the right team: You’ll need top developers, auditors, compliance lawyers, and banking partners.

  3. Lead with compliance: It’s your license to operate, not an obstacle.

  4. Think long-term: This is financial infrastructure. Reliability beats speed.

The opportunity is massive, but success depends on trust, transparency, and long-term execution.

About Arch

Arch is building a next-gen wealth management platform for individuals holding alternative assets. Our flagship product is the crypto-backed loan, which allows you to securely and affordably borrow against your crypto. We also offer access to bank-grade custody, trading and staking services.

Disclaimer: This article is for informational purposes only and does not constitute investment advice. Cryptocurrency investments are volatile and risky. Always conduct your own research before making investment decisions.

ChainFi, Inc (dba "Arch Lending" and referred to as "Arch" on this website) is not a bank. 


Loan Services. Crypto backed loans (“Loans”) are offered to U.S. borrowers by ChainFi, Inc. NMLS #2637200. NMLS Consumer Access.


Loan Availability. Loan availability may vary based on jurisdiction. Loans are currently not available to U.S. residents of AL, CA, DE, HI, MN, MS, MT, NV, ND, RI, SC, SD, TX, VT, VA, or WA or to U.S. businesses in CA, DC, HI, MT, NV, NM, ND, RI, SD, or VT. We encourage you to contact us to determine if our loans are available in your state.


Loan Agreement. Loans are issued pursuant to a loan agreement between Arch and you. This legally binding document outlines your rights, obligations, interest rates, repayment schedules, potential fees, default consequences, and any other terms and conditions related to your loan. Your loan agreement may contain state-specific provisions. By signing the loan agreement, you acknowledge your acceptance of these terms, so please ensure you understand every aspect before proceeding. 


Interest Rates. Annual interest rates are subject to change and may vary based on loan type, the principal amount requested, and the borrower's jurisdiction of residence. 


Supported Assets. For the latest list of supported assets, refer to our Help Center.


No Financial, Investment or Tax Advice Provided. The information on this website, articles, guides, tools, or communications, is for general informational purposes only. It is not, and should not be construed as, financial, investment, tax, or other professional advice. Arch is not a financial advisor, investment advisor, broker, tax advisor, or accounting firm. We do not provide personalized advice or recommendations for your unique financial situation or goals. You should consult a qualified professional before making any financial, investment or tax decisions. Any examples, hypothetical scenarios, calculator results, or general discussions of financial or tax concepts are for illustration only and don't guarantee specific outcomes or apply to your personal circumstances. By using this website, you acknowledge you are solely responsible for your financial decisions and will seek independent professional advice as needed.


No Guarantee of Offers, Loans, or Returns. Your use or access to this website or platform does not guarantee the availability of any current and/or future offer, promotion, terms, loan, or return. All offers, promotions, terms, and loans are subject to availability and the sole discretion of Arch. We reserve the right to modify or withdraw any offering at any time without prior notice.


State-Specific Disclosures. Additional state-specific disclaimers may apply depending on your location. We encourage you to review all relevant disclaimers and terms carefully before proceeding.

*State of Idaho Disclaimer. In Idaho, ChainFi, Inc is doing business as Arch Lending and does not conduct activity under the name Arch.

ChainFi, Inc (dba "Arch Lending"), 595 Broadway, Floor 4, New York, NY 10012


For general questions, visit our Help Center or use the Intercom chat widget in the bottom right corner of any screen on this website. 


For customer service or complaints, email us at support@archlending.com, or call us toll-free: +1 877 665 4759 between Monday-Friday from 9am-7pm ET and Saturday-Sunday from 10am-5pm ET.

© 2025 All Rights Reserved

ChainFi, Inc (dba "Arch Lending" and referred to as "Arch" on this website) is not a bank. 


Loan Services. Crypto backed loans (“Loans”) are offered to U.S. borrowers by ChainFi, Inc. NMLS #2637200. NMLS Consumer Access.


Loan Availability. Loan availability may vary based on jurisdiction. Loans are currently not available to U.S. residents of AL, CA, DE, HI, MN, MS, MT, NV, ND, RI, SC, SD, TX, VT, VA, or WA or to U.S. businesses in CA, DC, HI, MT, NV, NM, ND, RI, SD, or VT. We encourage you to contact us to determine if our loans are available in your state.


Loan Agreement. Loans are issued pursuant to a loan agreement between Arch and you. This legally binding document outlines your rights, obligations, interest rates, repayment schedules, potential fees, default consequences, and any other terms and conditions related to your loan. Your loan agreement may contain state-specific provisions. By signing the loan agreement, you acknowledge your acceptance of these terms, so please ensure you understand every aspect before proceeding. 


Interest Rates. Annual interest rates are subject to change and may vary based on loan type, the principal amount requested, and the borrower's jurisdiction of residence. 


Supported Assets. For the latest list of supported assets, refer to our Help Center.


No Financial, Investment or Tax Advice Provided. The information on this website, articles, guides, tools, or communications, is for general informational purposes only. It is not, and should not be construed as, financial, investment, tax, or other professional advice. Arch is not a financial advisor, investment advisor, broker, tax advisor, or accounting firm. We do not provide personalized advice or recommendations for your unique financial situation or goals. You should consult a qualified professional before making any financial, investment or tax decisions. Any examples, hypothetical scenarios, calculator results, or general discussions of financial or tax concepts are for illustration only and don't guarantee specific outcomes or apply to your personal circumstances. By using this website, you acknowledge you are solely responsible for your financial decisions and will seek independent professional advice as needed.


No Guarantee of Offers, Loans, or Returns. Your use or access to this website or platform does not guarantee the availability of any current and/or future offer, promotion, terms, loan, or return. All offers, promotions, terms, and loans are subject to availability and the sole discretion of Arch. We reserve the right to modify or withdraw any offering at any time without prior notice.


State-Specific Disclosures. Additional state-specific disclaimers may apply depending on your location. We encourage you to review all relevant disclaimers and terms carefully before proceeding.

*State of Idaho Disclaimer. In Idaho, ChainFi, Inc is doing business as Arch Lending and does not conduct activity under the name Arch.

ChainFi, Inc (dba "Arch Lending"), 595 Broadway, Floor 4, New York, NY 10012


For general questions, visit our Help Center or use the Intercom chat widget in the bottom right corner of any screen on this website. 


For customer service or complaints, email us at support@archlending.com, or call us toll-free: +1 877 665 4759 between Monday-Friday from 9am-7pm ET and Saturday-Sunday from 10am-5pm ET.

© 2025 All Rights Reserved

ChainFi, Inc (dba "Arch Lending" and referred to as "Arch" on this website) is not a bank. 


Loan Services. Crypto backed loans (“Loans”) are offered to U.S. borrowers by ChainFi, Inc. NMLS #2637200. NMLS Consumer Access.


Loan Availability. Loan availability may vary based on jurisdiction. Loans are currently not available to U.S. residents of AL, CA, DE, HI, MN, MS, MT, NV, ND, RI, SC, SD, TX, VT, VA, or WA or to U.S. businesses in CA, DC, HI, MT, NV, NM, ND, RI, SD, or VT. We encourage you to contact us to determine if our loans are available in your state.


Loan Agreement. Loans are issued pursuant to a loan agreement between Arch and you. This legally binding document outlines your rights, obligations, interest rates, repayment schedules, potential fees, default consequences, and any other terms and conditions related to your loan. Your loan agreement may contain state-specific provisions. By signing the loan agreement, you acknowledge your acceptance of these terms, so please ensure you understand every aspect before proceeding. 


Interest Rates. Annual interest rates are subject to change and may vary based on loan type, the principal amount requested, and the borrower's jurisdiction of residence. 


Supported Assets. For the latest list of supported assets, refer to our Help Center.


No Financial, Investment or Tax Advice Provided. The information on this website, articles, guides, tools, or communications, is for general informational purposes only. It is not, and should not be construed as, financial, investment, tax, or other professional advice. Arch is not a financial advisor, investment advisor, broker, tax advisor, or accounting firm. We do not provide personalized advice or recommendations for your unique financial situation or goals. You should consult a qualified professional before making any financial, investment or tax decisions. Any examples, hypothetical scenarios, calculator results, or general discussions of financial or tax concepts are for illustration only and don't guarantee specific outcomes or apply to your personal circumstances. By using this website, you acknowledge you are solely responsible for your financial decisions and will seek independent professional advice as needed.


No Guarantee of Offers, Loans, or Returns. Your use or access to this website or platform does not guarantee the availability of any current and/or future offer, promotion, terms, loan, or return. All offers, promotions, terms, and loans are subject to availability and the sole discretion of Arch. We reserve the right to modify or withdraw any offering at any time without prior notice.


State-Specific Disclosures. Additional state-specific disclaimers may apply depending on your location. We encourage you to review all relevant disclaimers and terms carefully before proceeding.

*State of Idaho Disclaimer. In Idaho, ChainFi, Inc is doing business as Arch Lending and does not conduct activity under the name Arch.

ChainFi, Inc (dba "Arch Lending"), 595 Broadway, Floor 4, New York, NY 10012


For general questions, visit our Help Center or use the Intercom chat widget in the bottom right corner of any screen on this website. 


For customer service or complaints, email us at support@archlending.com, or call us toll-free: +1 877 665 4759 between Monday-Friday from 9am-7pm ET and Saturday-Sunday from 10am-5pm ET.

© 2025 All Rights Reserved